The price of batteries for energy storage system (ESS) used in the private – public smart grid distribution project has dropped significantly this year. This is because Korea’s two battery leaders LG Chem and Samsung SDI are pulling the price. This is forecast to also serve as a catalyst for ESS market activation.
Smart Grid Institute of the Ministry of Trade, Industry and Energy announced on the 11th that it had selected management companies for ‘smart grid distribution support projects’ to center on ESS and advanced metering infrastructure (AMI), which will be invested with a government budget of KRW 6.2 billion. As for ESS project, LG Electronics, which took over LGU+ power division last year, and Samsung affiliates S1, CVnet and Ion were selected. Management company selection was carried out in the lowest bidding method, and thus price competitiveness was crucial.
The volume of ESS distribution, to which KRW 4.7 was invested, was set around 9MWh according to fierce price competition. Considering that the government’s share of the overall implementation cost is 70%, ESS (1MW) price for a successful bid was approximately KRW 750 million. Excluding power conversion system (PCS) and container energy management system (EMS), which are the components of ESS, the price of a battery cell is around KRW 550 million. Compared to battery prices applied to an ESS implementation project for frequency regulation promoted by KEPCO or an ESS distribution project last year (between KRW 600 million – 650 million), the price of a complete ESS dropped by around 15%. Accordingly, medium to large-scale secondary cells of LG Chem (5MWh) and Samsung SDI (4MWh), which are companies with price competitiveness, dominated the bidding, while companies using batteries from small-scale companies or small cells (Product Name: 18650) priced lower than medium to large-scale batteries lost the bidding. In addition, Hyosung and POSCO ICT, which won the largest number of ESS contracts in Korea, lost the bidding because their price competitiveness was lower.
The industry forecast that battery price reduction led by LG Chem and Samsung SDI will bring a positive effect to ESS market activation. However, there is a concern that this can be a negative factor to small companies with lower price competitiveness. “Project management companies were selected with the price of medium to large-scale batteries for ESS, which had been a burden in the past, lowered by approximately 15%,” said an industry insider. “The lowered battery price will bring a positive effect to the ESS market. However, it would make small scale companies’ market participation more difficult.”
For smart grid AIM distribution project, to which the government’s share of KRW 1.5 billion is invested, SK Telecom and Omni System were selected as management companies. Smart Grid Institute will wrap up the contract with selected companies during this month and commence distribution targeting industrial complexes nationwide next month.